Hospital Closures Can Be Prevented Thanks to the Federal ERISA Appeals Process

It seems as though hospital closures pop up in the news constantly. Every week at least one of them files the paperwork necessary to go out of business due to an extremely negative cash flow. Some people in the media are quick to blame that hospital’s management and board for the problem, however, over 98% of the time, that negative cash flow is due to unpaid or underpaid commercial health insurance claims. When the insurance companies don’t pay their bills on time, the hospital’s cash flow can crumple like a house of cards. The worst thing about this is that it doesn’t need to be this way.

The Problem with Hospital Closures

The closure of a hospital has a negative effect on the entire community that surrounds it – regardless of the location. What do we mean by this? Well, the closing of a hospital in a city might have a smaller impact, at least on paper, since there are other places that the patients can go to for care. However, they are used to that hospital and, depending on how often they go there, might have relationships with the doctors, nurses, and even the volunteers working at the front desk. This is taken away when the hospital closes.

A hospital that ceases to operate in a rural location has an even bigger impact on the area. They might be the only hospital around for miles. Time matters when it comes to some types of health emergencies, so having to go to a hospital that’s 30 miles away (a half hour drive or more, depending on the road conditions) can be the difference between life and death. This is why hospital closures are so problematic and why some legislators have begun to fight them.

Caring For Patients

The Situation In Illinois

Recently, Westlake Hospital in Melrose Park, Illinois popped up in the news. The hospital is millions of dollars in the red, and the people in charge put the closure process in motion. Their CEO stated that “With declining staffing rates and more attrition expected, a temporary suspension of services is necessary to assure safe and sufficient operations. This action is being taken after considering all alternatives and with the best interest of our patients in mind.” This makes sense, because Westlake was losing two million dollars every single month, and wasn’t getting enough inpatient procedures to turn things around.

Things became more complicated when their 60-day closure plan was interrupted by a local judge who refused to let the hospital go without a fight. According to the article, “Pipeline’s plan to immediately suspend services at the hospital was put on hold yesterday evening when Judge Eve Reilly granted the village of Melrose Park a temporary restraining order to prevent the hospital from closing. The restraining order prevents Pipeline from closing the hospital, cutting services or laying off workers until after the state Health Facilities and Services Review Board considers the application to shut down the hospital on April 30.” This led to a kind of standoff between the hospital and the administrators of Melrose Park, with the legal system on their side.

Things became even more interesting within the last week, when the owner of Westlake Hospital, Pipeline, ignored the restraining order and commenced with their closing procedures. They began fining the hospital $200,000 each day until it restored the healthcare services that it formerly offered. But that’s not all – “the case took another turn on April 18, when an Illinois Appellate Court panel threw out the temporary restraining order against Pipeline. The three-judge panel said the village of Melrose Park had no standing to seek the action. Hours later, the Illinois Supreme Court reinstated the TRO, preventing Pipeline from suspending services at the hospital while Melrose Park leaders file an appeal.” Now the hospital’s closure is in a kind of legal limbo where both sides think that they’re correct.

Whatever the outcome will be, it won’t be good for the people of Melrose Park who went to that hospital to see their doctors, have routine procedures done, or even visit the emergency room for injuries and severe illnesses. They are the ones that lose out.

Tools of the Trade

How Did This Happen?

The main question that everyone is asking is – how did this happen? How did a hospital that was seemingly in good financial standing have everything turn around on them so quickly? And, with the cost of healthcare, how can a hospital even go bankrupt in the first place? These aren’t easy questions to answer, simply because of the painful process that the hospital’s CEOs went through before starting those closing procedures.

It all starts with hospital expenses. As you can imagine, there are a lot of them, including things like cleaning staff and supplies, equipment and machinery, doctors, nurses, and other employees. It’s easy for a hospital to run on thin margins because the procedures that patients go in for aren’t reimbursed by the commercial health insurance companies until much later on. Once those procedures are completed, the information is sent to a billing department, who looks up the proper codes and the amounts due, and then sends those claims to the commercial health insurance company. And then that company doesn’t pay right away. This is what leads to financial harm to the hospital.

The State-Level Appeals Process

Once the commercial health insurance company receives the claim, they have three choices. They can pay it, they can short-pay it (which involves paying just some of what they owe), or they can reject it outright and send it through the state-level appeals process. Every hospital, clinic, and so on, receives three of these appeals at the state level. Often, the billing department will look over the claim in order to determine exactly why it was sent back. In many cases, it was due to a coding error or even a misspelling in the patient’s name. Sometimes, those appealed claims get paid, but in many cases, they aren’t. Then, once those three state-level appeals are exhausted, the claim ends up in a debt bucket or on the wrong side of the balance sheet. At this point, many hospitals give up trying to collect that money.

Federal ERISA Appeals Are the Best Solution

The one thing that many hospital administrators don’t know is that once those state-level appeals are exhausted, they have another option – the Federal ERISA process. Yes, this law mostly protects employee retirement accounts, but it does have some legislation over commercial health insurance companies as well, as long as the plan is one that the employee pays into. According to Federal ERISA law, those health insurance companies are indeed on the hook for those unpaid claims. The problem is that the billing department employees aren’t taught how to collect on the claims using this law. Many law schools don’t cover it either. It’s a very specialized process.

This Is Where We Come In

If your hospital or clinic is drowning in unpaid claims that have exhausted their appeals, then you need to contact us. We use Federal ERISA appeals in order to make them pay up. You can reach us at (972) 331-4140 or by filling out the contact form on our website. One of our experts will contact you and discuss the process in more depth.